This Article First Appeared In Indian Express On Jan 27, 2023
India has done relatively well despite multiple shocks in the past three years. The reasons include its “double diversity” advantage, arriving on a feasible set of reforms and the success of counter-cyclical policy in smoothing shocks. These may help mitigate the very real downside risks and sustain growth at above 6 per cent.
A large and diverse country has an advantage under a global slowdown since some sectors continue to do well despite others slowing. Currently, even as manufacturing exports slow down, services exports and remittances are robust, reducing the current account deficit. The trend growth in digitisation — not merely cyclical — is powering the growth of tier 2 and 3 cities. The US is also doing relatively well as a large economy, but India has the additional advantage of less correlation across sectors.
The second advantage is global diversification away from over dependence on any one country. The China+1 and Europe+1 factor will continue to create opportunities for India.